By Paul Ploumis 25 Aug 2015 Last updated at 06:33:29 GMT
(Kitco News) - An exodus of short bets, among money managers, in the gold futures has helped the market shed its net short positions; however, silver is still unable to attract investors, according to the latest data from the Commodity Futures Trading Commission (CFTC).
Based on the disaggregated Commitment of Traders Report (COTR), for the week ending Aug. 18, money-managed speculative gross long positions of Comex gold futures rose by 3,568 contracts to 112,075. At the same time, short-covering was almost three times as strong, with short contracts falling by 9,779 contracts to 104,158. Gold’s net length now stands at 7,917 contracts.
Looking at the price action in Comex December gold futures, the considerable short-covering did not have a major impact on prices as the market showed gains of less than one percent. Investors will have to wait until Friday to see the latest investment positions that drove gold to a six-week high Friday.
However, the fact that gold’s net length is expected to grow, could make the market more susceptible to renewed selling pressure in the short-term, said commodity analysts at Commerzbank.
“Speculative net long positions are likely to have risen further since then on the back of the price surge. This would make gold prone to setbacks if these weak hands were to sell again, however,” they said in a research note Monday.
Ole Hansen, head of commodity strategy at Saxo Bank, also said he believes that gold could struggle in the near-term. In a commentary written Monday, he explained that most of the price action is related to short covering and for this reason “the upside potential at this stage seems limited.”
“A clear break above trendline resistance at $1,169/oz is required to give the yellow metal an additional technical boost. If not, we could potentially see outright sellers and relative value traders turn against it once we begin to see stock markets stabilize,” he said.
However, commodity analysts at Barclays Capital are slightly more optimistic on gold prices. Although gross short positions have been reduced they are still at extremely high levels and the market could be sensitive to further squeezing in the marketplace.
Jonathan Butler, precious metals strategist at Mitsubishi, agreed that gold could still benefit from further short-covering.
“A big reduction in gross short positions meant that the gross short book slipped to a 5-week low but remained at 93% of the all-time high, implying further short covering could be in order in the weeks ahead,” he said in a note to clients Monday
While the gold market has managed to see positive investment positioning, silver remains net short has investors exiting their positons.
The disaggregated COTR showed money-managed speculative gross long positions of Comex silver futures fell by 1,935contracts to 40,045. At the same time, short contracts fell by 1,845contracts to 40,368. The silver market is net short by 323 contracts.
During the survey period, Comex September silver prices fell more than 3%, with the worst of the price action on Aug. 18 as prices fell below $15.00 an ounce.
“The gross long book has been quietly creeping lower for some time as bulls unwind their bets, and now stands at the lowest since mid-April,” said Butler.
Courtesy: Kitco News